Pack 11

Question 1

Define state provision

Answer 1

State provision refers to the government directly providing a good or service, funded from general tax revenue

Question 2

Define information provision

Answer 2

Providing information to help economic agents make decisions that reduce market failure.

Question 3

Two ways in which information may be provided to try and close info gaps

Answer 3

The government can make it a requirement for schools to teach students about the information.

Advertisements spreading awareness.

Question 4

Explain how info gaps can address overconsumption, with the aid of a diagram

Answer 4

The government may provide information about how dangerous tanning beds really are so consumers realise the overlooked risk of skin cancer which reduces consumption and closes the info gap.

Diagram:
-Draw Supply&Demand with demand shifting left.
-Draw negative externality diagram where MPB=MSB.

Question 5

Explain how info provision can address underconsumption, with the aid of a diagram

Answer 5

Advertisements could spread information about how gyms actually help you live a healthier lifestyle and don’t just make you look better so more people start taking the gym seriously which closes the info gap.

Diagram:
-Draw Supply&Demand with demand shifting right.
-Draw positive externality diagram where MPC=MSC.

Question 6

Explain 3 pros of info provision as a tool of correcting market failure. Include 3 factors its effectiveness will depend on

Answer 6

-Does not directly interfere with the market mechanism, allowing market forces to determine the market price and quantity.
-Alters consumer demand and therefore improves allocative efficiency.
-May be cheaper and easier than other methods to reduce market failure like subsidies.

Effectiveness depends on:
-whether the right ppl are targeted
-whether the ppl understand the message
-whether the people ignore the info like if they are addicted.

Question 7

Explain 3 cons of info provision as a tool of correcting market failure. Include 3 factors its effectiveness will depend on

Answer 7

-Info may be ignored since it isn’t forced.
-Ppl might already be aware of the information but choose to ignore it and act irrationally.
-Providing info will increase government costs and creates an opportunity cost for the money spent to deliver the information.

Effectiveness depends on:
-the size of the info gap
-whether ppl are able to act upon the message, some people may be aware of the benefits of eating fruit but might not be able to afford it.

Question 8

Define the term regulation

Answer 8

Government rules in markets to influence the behaviour of consumers and producers.

Question 9

Examples of regulations

Answer 9

-Have to be over 18 to buy cigarettes.
-Cant smoke in public spaces.
-Advertising bans on cigarettes.